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Facebook will obviously not be bulletproof
Social media giant lost about one-fifth of its value in the extended session on Wednesday after its earnings report missed its revenue forecast and shown to slow down the growth of users. A weak orientation has also shaken investors.
FB, + 1.32%
dropped nearly 7% immediately after the earnings report, and then dropped to over 20% after a conference call with analysts. Nearly 34 million shares changed hands during the extended session, well above the average volume of 17 million shares for a regular trading session over the last month.
If the losses were maintained in Thursday 's regular session, Facebook would lose more than $ 100 billion in market capitalization and lose the gains of the stock for the year to date. At the end of the session, Facebook was trading at $ 173.50, down 20%.
Facebook had recovered from a decline earlier this year as a result of the Cambridge Analytica scandal, one of the controversies and warning signs The company had managed to withstand little damage to its stock . But the decline in revenue and user growth, topped by a warning from the leaders, seemed to end this race.
"Orientation, that's the nightmare," said Daniel Ives, head of technology research. "If you look at their forecasts for the second half of the year in terms of user growth, and the spending profile, it brings together fundamental concerns on Facebook after Cambridge Analytica."
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The company based in Menlo Park, California reported a net profit of $ 5.12 billion for the quarter, which equates to $ 1.74 per share, compared to $ 3.89 billion or $ 1.32 per share. a year ago. The net result was above analysts' average estimates of $ 1.71 per share.
However, profits are not what has rocked investors. Facebook recorded sales of $ 13.04 billion, an increase of 41.9% over the previous year, but lower than analysts' estimates and earlier growth rates. The number of users stagnated in the United States and Canada and decreased in Europe compared to the previous quarter.
But the title did not take off until Chief Financial Officer David Wehner did not reveal that the social media giant was expecting revenue growth.
"Our total revenue growth rates will continue to slow in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages in previous quarters, both in the third quarter and in the second quarter of the year. Q3, "he said in the conference call. Wehner also said that Facebook is still expecting spending to increase by 50% to 60% over last year.
See also: Zuckerberg effectively defends the right of Holocaust deniers to be heard on Facebook
In the past, founder and CEO Mark Zuckerberg said that the company was planning to hire 20,000 people for manage security on its platforms in response to such controversies as the use of Facebook to push false news ahead of the 2016 US elections. The company revealed that its head count increased by 47% to 30 275 since the period of the previous year, part of these disproportionate expenses.
"As I have said in past appeals, we are investing so much in safety that it will have a significant impact on our profitability," said Zuckerberg. "We are starting to see this quarter."
Although Ives says that the quarter was far from disastrous – it was decent with some basics – it is expected that investors will continue to punish the stock in the short term.
"The neighborhood itself had weak geographical points and disappointed the bulls," Ives said. "There are many natural headwinds, as it is the quarter who places the stock in the penalty zone for a moment until they can prove that the tailwinds and the User growth is back on track. " 19659002] See also: Facebook should benefit from new European rules on data confidentiality, according to an analyst
Facebook figures in Europe have decreased largely thanks to the general data protection regulations of the European Union. during the quarter. Some analysts had speculated that GDPR could actually benefit from giants like Facebook and Alphabet because they would be able to implement the new requirements unlike small businesses, but Zuckerberg and other executives said that GDPR was the reason for the slowdown of European users. It has fallen by 3 million daily users and 1 million monthly users since the first quarter.
"We saw a drop in monthly assets in Europe, as a result of about 1 million people, and at the same time, it was encouraging to see the vast majority of people claiming that although we wanted to use the background, Zuckerberg said on the earnings call with analysts.
chief operating Sheryl Sandberg said on the appeal that the GDPR has not affected the company's the company, including from the websites that they visit, to make our ads more relevant and improve their overall experience.First Line.
See: 5 Things To Know About GDPR Rules Taking effect Friday – which could cost billions of big and bad technologies
The only grace for Facebook could be the continued support of advertisers.Less subject to quarterly investor demands, advertisers are not yet perceived as prevo to reduce Facebook's budgets.
"There is an unprecedented scale, the industry's best advertising technology," said Jesse Math, head of Facebook. "In the short term, Facebook is still viable.Really this quarter and this year, it is focused on a long-term strategy, all they do is focus on making Facebook a place where users want to be. the changes made to the platform, the algorithms and tools used by advertisers are long term. "
Facebook's action plummeted after several hours of use, but it also drew rivals social media Twitter Inc.
TWTR, + 4.86%
and the parent company Snapchat Snap Inc.
SNAP, + 1.90%
to the party, sending both stocks down by one-digit percentages. The Facebook title has gained 23% this year, as the S & P 500 index
SPX, + 0.91%
increased by 5.5%.
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